A Possible Claim where there is no Payment Schedule in response to a Payment Claim under the Security of Payment Act 1999 – Possible Summary Judgment where no defence to the Claim

29/12/2023

In the Building and Construction Industry Security of Payment Act 1999 (“SOP Act”), there are several circumstances under which the Claimant may seek a Court Order to recover money owed by the Respondent.

One is where a Respondent to a claim resulting in an Adjudicated Amount being due by the Respondent to the Claimant which has not been paid.

A second alternative which does not require an Adjudication Determination is a claim pursuant to section 15(2)(a)(i) or section 16(2)(a)(i) of the SOP Act.

One of the circumstances is when the Claimant serves a Payment Claim on a Respondent and the Respondent does not provide a Payment Schedule to the Claimant:

1. Within the time required by the relevant construction Contract, or
2. Within 10 business days after the Payment Claim is served,

whichever time expires earlier and fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the Payment Claim relates.

In those circumstances, the Claimant may seek to recover the unpaid portion of the claimed amount from the Respondent as a debt due to the Claimant, in any Court of competent jurisdication pursuant to section 15(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999.

Another circumstance is when the Claimant serves a Payment Claim on the Respondent and the Respondent serves a valid Payment Schedule in which the Payment Schedule indicates a scheduled amount that the Respondent proposes to pay to the Claimant. However, the Respondent fails to pay the whole or any part of the scheduled amount to the Claimant on or before the due date for the progress payment to which the Payment Claim relates.

In those circumstances, the Claimant may recover the unpaid portion of the claimed amount from the Respondent, as a debt due to the Claimant, in any Court of competent jurisdication pursuant to section 16(2)(a)(i) of the Security of Payment Act.

The considerations as to whether an Application should be made to a suitable Court pursuant to s 15(2)(a)(i) or s 16(2)(a)(i) generally include, but not limited to:

1. Costs of the proceedings;
2. Monetary amount of the claim;
3. Possibility of a successful negotiated settlement with the respondent in relation to the claim either before commencing proceedings or during the proceedings;
4. Time frame of attempted negotiated settlement;
5. Time frame of court proceedings;
6. Cash flow or financial strength of the claimant;
7. Financial strength of the respondent;
8. Risk of the Respondent’s reliance on section 18 of the Australian Consumer Law by way of defence to application; and
9. Risk if an Application for Security for Costs by the Defendant against the Plaintiff.

The Applications made often involve claims for significant amounts of money. For example, the claimed amount is $575,702.42 in Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd [2006] NSWCA 238 (“Bitannia”), $1,785,492.84 in Marques Group Pty Ltd v Parkview Constructions Pty Ltd [2023] NSWSC 625 (“Marques”).

In order to obtain a relatively quick Judgment in Court proceedings, the Claimant often will seek Summary Judgment which if successful, will obviate the necessity for a full hearing.

Rule 13.1 of the Uniform Civil Procedure Rules 2005 provides in relation to an Application for Summary Judgment:

1. If, on application by the Plaintiff in relation to the Plaintiff's claim for relief or any part of the Plaintiff's claim for relief—

(a)      there is evidence of the facts on which the claim or part of the claim is based, and

(b)      there is evidence, given by the Plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the Defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the Court may give such Judgment for the Plaintiff, or make such order on the claim or that part of the claim, as the case requires.

2. Without limiting subrule (1), the Court may give Judgment for the Plaintiff for damages to be assessed.

(3) In this rule, a reference to "damages" includes a reference to the value of goods.

The Claimant is assisted by sections 15(4)(b) and section 16(4)(b) of the Building and Construction Industry Security of Payment Act 1999 to satisfy conditions at the UCPR rule 13.1(1)(b).

Section 15(4)(b) of the SOP Act provides that:

The Respondent is not, in those proceedings, entitled

1. To bring any cross-claim against the Claimant, or
2. To raise any defence in relation to matters arising under the construction contract.

Section 16(4)(b) of the SOP Act has words to the similar effects as section 15(4)(b).

Additional consideration – Section 18 of Australian Consumer Law

However, in the light of Bitannia and Marques case, the Claimant must consider where the Respondent could rely on breaches of section 18 of the Australian Consumer Law by way of defence.

As mentioned in our prior articles, the alleged Builder’s breaches of section 18 of the Australian Consumer Law which have been considered by the Court include:

(a)      Builder’s conduct in relation to the service of the Payment Claim concerned in the proceedings for example, putting the name of the architect on the cc’ed list on the cover page of the Payment Claim while the particular Payment Claim had never been sent to the architect, who normally prepared Payment Schedules.

(b)      Builder’s conduct in relation to the elements of the Payment Schedule for example, where the Contract provides each Payment Claim by the Builder must include a statutory declaration that the Builder has paid all employees and subcontractors in relation to the works in the Payment Claim. Later the statutory declaration accompanying the Payment Claim was found defective.

The Court concluded that the Respondent could rely on breaches of section 18 of the Australian Consumer Law by way of defence to a claim.

Accordingly, the Claimant’s motion to seek Summary Judgment was dismissed however, the Court could consider in the hearing of the matter, the Claim, the defence and the evidence.

The Bitannia and Marques case serve as a reminder to the Claimant to consider and assess the risk of the Respondent’s reliance on section 18 of the Australian Consumer Law by way of defence to application in suitable jurisdiction, to recover the unpaid portion of the claimed amount pursuant to either section 15(2)(a)(i) or section 16(2)(a)(i) of the Act.

This is only a preliminary view and is not to be taken as legal advice without first contacting our experienced Lawyers at Watson & Watson by contacting Richard Watson Accredited Specialist Commercial Litigation in the stream of Building and Construction by contacting his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.